California Financial Regulator Accuses 11 Entities of Crypto Asset-Fueled Pyramid and Ponzi Schemes

California’s Department of Financial Protection and Innovation (DFPI) says it issued desist and refrain orders for 11 entities that it accuses of engaging in fraudulent investment schemes involving crypto assets. 

In a new statement, the DFPI says that the entities are operating Ponzi and pyramid schemes, and violate securities laws.

Included in the 11 listed entities are “purported” crypto asset trading platforms, a decentralized finance (DeFi) platform and a metaverse software development company.

The state regulator says that the 11 entities have the classic hallmarks of fraudulent high yield investment programs (HYIPs).

“These are investment frauds that typically promise high returns with low risk and overly consistent returns, provide little details about the people running the HYIP, use vague language to describe how the HYIP makes money, offer referral bonuses, facilitate deposits and withdrawals with crypto assets, and use social media to gain attention and attract investors.”

DFPI Commissioner Clothilde Hewlett says that the department’s recent action is a bid to protect consumers from crypto scams, and help ensure that California can continue to be a hub for the digital asset space. 

“The DFPI will continue to protect California consumers and investors from crypto scams and frauds… These actions not only protect consumers, but also ensure California remains the premier global location for responsible crypto asset companies to start and grow.”

In August, the DFPI also issued bankrupt crypto lending firm Celsius Network a desist and refrain order for allegedly violating California’s Corporation Code. This week, it issued the same order to crypto lender Nexo for allegedly violating securities laws with its Earn Interest Product (EIP). 

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